German automaker Volkswagen and the world's largest ride-hailing company are in talks to form a joint venture. Carmakers are increasingly moving to work with transportation startups like Didi and Uber.
Executives at Volkswagen (VW) told media on Monday that the German carmaker is in talks to form a joint venture with Didi Chuxing, China's biggest ride-hailing service.
The partnership would include VW managing a fleet of around 100,000 cars for Didi, some two thirds of which would be VW models. VW would also design "purpose-built" vehicles for Didi's services.
The joint venture is expected to be finalized in early May.
It would be a significant initiative between VW, the world's largest automaker and Didi, the global leader in ride-hailing, at a time when ride-sharing services are forcing auto manufacturers to adapt their business strategies. It also represents an increased push by VW to capitalize on the evolving Chinese transportation market.
More than just ride-hailing
"The joint venture with Didi is not just about ride-hailing. We want to explore mobility projects as well as autonomous driving and robo-taxis," Weiming Soh, a board member in charge of strategy at Volkswagen's China subsidiary, told The Wall Street Journal.
In addition to fleet management, the joint venture would also see VW provide Didi with electric and autonomous vehicle technology. Didi has predicted that much of its fleet will be electric in the future.
However, the fuel or technology the new VW cars in the joint venture would use remains unclear.
"The parties are still exploring details of the cooperation. Potentially, both parties will focus on building together a fleet operation business, and look into other potential areas such as designing new car models for ride-hailing," a Didi spokesperson told The Wall Street Journal.
The partnership would also give VW access to valuable customer behavior data collected through the ride, a VW executive told Reuters agency. Didi provides around 3 million rides in China every day.
"To succeed as a car company in this new ecosystem, we need to know who our customer is, what their journey is and what our strategy should be," a VW executive told Reuters.
The ride-service startup announced last week it would work with 31 automobile industry partners to pursue car-operator technology "designed to embrace the upcoming transportation revolution." Didi executives named electric vehicles and intelligent driving technologies as key elements.
Didi also recently launched its operations in Mexico, the Chinese firm's first in its own name outside of China.
Carmakers have attempted to shy away from becoming contract manufactures to ride-sharing technology firms out of fear that resulting profits would be slim.
But as ride-hailing services have reduced car ownership in lucrative markets like China, companies like VW have begun to seek out alternative future revenue streams.
In the expected joint venture, VW would hold a 40 percent stake, which would rise to 50 percent at a later date, The Wall Street Journal said.
VW recently announced it had earmarked €15 billion ($18.2 billion) to put toward investments in ride-hailing, self-driving vehicles, digitalization and other services in China by 2020. Half of Volkswagen's cars are sold in China, according to the company figures.
Didi and VW have been talks for more than a year. The two companies began looking into a joint venture after VW rejected a proposal to take a stake in Didi itself.
Other car manufacturers have begun courting ride-sharing services, with Fiat, Jaguar Land Rover and Honda agreeing to provide cars to Alphabet Inc.'s self-driving unit and ride-sharing. Last year Volvo and Daimler AG said they would supply cars to Uber.